minimill n lazycam issues

OK, we got our grizzly mini mill g8689 going again and are trying to learn the CNC process. I wanted the kids to just cut a 0.615 hole in a piece of 1/8" thick material, so we ...
1 - Drew the 0.615 circle in TurboCad about vs 8 - I think 1:1 scale, and saved as dxf or dwg.
2 - Opened that file in LazyCAM, and I thought we set the tool to 0.120".
3 - We uploaded the GCode to Mach3 and ran it up away from the work. It looked to go in a circle, so we
4 - Zeroed the axises and cut away.

At first we ended up with a spiral that was 0.615+0.120=0.735 in dia. So we changed Gcode to plunge to cut depth first, then cut the circle - ended up with a hole of about 0.735 dia. It appears that changing the tool dia in LazyCAM does not change the gcode sent to MACH3.

The only way we could get the right diameter hole was to alter the gcode posted by LazyCAM to MACH3.

I thought we had the chain selected when we changed tool size (we only had one chain) - but maybe not. But I'm assuming that we are doing something wrong in the LazyCAM tool selection/definition regard. Suggestions?

Thanks, Chuck.